Natural Resources Should Benefit All, Not Just a Wealthy Elite

Natural Resources Should Benefit All, Not Just a Wealthy Elite

This article is being distributed by Transparency International, a leading anti-corruption organization. It originally appeared in the “World Bank Press Review” of December 16, 2002.

In poor countries blessed with oil, revenue from oil has a way of making most people poorer, reported the New York Times on December 15. The pattern is so pervasive and has been going on for so long that it has a catchy slogan: the paradox of plenty.

No place has been more paradoxical for more years than Angola.

[The Progress Report says — actually, Nigeria is as good an example. Blessed with enormous oil reserves, the population is desperately poor due to injustice. To remedy that situation, the Niger Delta Fund Initiative seeks to give all Nigerians a share of the benefits.]

Angola is potentially the richest country in Africa, with huge reserves of offshore oil and a population of just 12 million. Oil money, though, has bought decades of war, while giving Angolans a terrible standard of living. Although the war ended this spring, it’s still not clear where the money is going (or even how much there is). In the past five years, $4 billion has vanished; meanwhile, the world spends about $200 million a year to feed poor Angolans.

To break this cycle, in Angola and elsewhere, a simple idea has emerged this year. It also has a catchy slogan: Publish What You Pay. The World Bank backs the idea, as does George Soros, the financier and human rights crusader, as do 70 private aid agencies around the world. The Publish What You Pay coalition prods major companies to declare how much money they give governments in order to extract oil and minerals. If citizens know how much money comes in, they can, at the very least, figure out how much is stolen. Forcing transparency on corrupt governments would increase pressure on leaders to spend more on schools, hospitals and roads – and might motivate citizens to toss out known thieves.

British Prime Minister Tony Blair gave the idea a boost this autumn by calling on all companies involved in oil and mineral extraction to voluntarily announce how much they pay. But the Publish What You Pay coalition wants more. They want regulators of the world’s richest stock markets, like the Securities and Exchange Commission, to compel oil companies to declare net annual payments to countries like Angola. None currently do.

Most governments of oil-producing regions hate this idea. And oil companies fear losing billion-dollar concessions to competitors that will keep their mouths shut. This is not an irrational fear. When BP announced last year that it would publish its payments to Angola, the government threatened to cut the company off unless it ”scrupulously respects” confidentiality laws.

In all this, says the story, the administration of US President George W. Bush has been noticeable for not taking a leadership role. Forty percent of Angola’s oil is exported to the US.

In a separate report, the NYT also notes that this year brought several peace initiatives based on an important new idea: the quickest way to stop a civil war is to cut off the funds of those doing the fighting. Throughout Africa and in parts of Asia and Latin America, guerrillas finance their armies through the illegal export of commodities: timber, diamonds, oil and coca. Policy makers are now trying to encourage guerrillas to give up their fight by cutting off the money spigot. An embargo, they believe, can put rebels out of business or drive them to the negotiating table.

[The Progress Report says -- another, more important way to put rebels out of business is to establish justice. In a system where claims and complaints are settled justly, there will be no violent rebel movement.]

Paul Collier, research director of the World Bank, and his student Anke Hoeffler happened on the connection while studying civil wars and economic growth. They were shocked to discover that the single best predictor of conflict was a nation’s dependence on the export of commodities. Political grudges are common, Collier found, but in most developing nations they turn into armed conflicts only when the dissenters have the money to buy guns and hire soldiers. The easiest way to get the money to do that is by looting natural resources.

[The Progress Report says -- "looting natural resources" is not only the way that rebels get funding. Corrupt governments and corrupt corporations are by far the leading looters of natural resources. In all cases, it is unjust to seize exclusive control of benefits from natural resources which are, after all, properly the common heritage of all humanity.]

Transparency — no secret deals — is essential for a free market to operate. Do you favor transparency? How about your government? How can we help transparency to spread? Tell your views to The Progress Report!

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Arts & Letters

Geonomics is …

in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.

what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, in-cluding the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.

a new field of study offered in place of economics, as astronomy replaced astrology and chemistry replaced alchemy. Conventional economics, in which GNP can do well while people suffer, is a bit too superstitious for my renaissance upbringing. If I’m to propitiate unseen forces, it won’t be inflation or “the market”; let it be theEgyptian cat goddess. At least then we’d have fewer rats. Meanwhile, believing in reason leads to a new policy, also christened geonomics. That’s the proposal to share (a kind of management, the “nomics” part) the worth of Mother Earth (the “geo” part). If our economies are to work right, people need to see prices that tell the truth. Now taxes and subsidies distort prices, tricking people into squandering the planet. Using land dues and rent dividends instead lets prices be precise, guiding people to get more from less and thereby shrink their workweek. More free time ought to make us happy enough to evolve beyond economics, except when nostalgic for superstition.

a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.

as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.

a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heritage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.

of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.

an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?

the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.

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Thoughts for the Day

There ought to be one day — just one –when there is open season on Congressmen.

Will Rogers

I would no more teach children military training than teach them arson, robbery, or assassination.

Eugene V. Debs

A nickel ain’t worth a dime anymore.

Yogi Berra

I want to be thoroughly used up when I die, for the harder I work the more I live. I rejoice in life for its own sake. Life is no brief candle to me. It is a sort of splendid torch which I have gotten hold of for the moment and I want to make it burn as brightly as possible before passing it to future generations.

George Bernard Shaw

Always go to other people’s funerals, otherwise they won’t come to yours.

Yogi Berra

As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.

Albert Einstein

High achievement always takes place in the framework of high expectation.